FFMS merger with the CB will significantly improve regulation – as expected by reform participants and instigators alike. Yesterday the Bank of Russia, FFMS and Minfin reps made a public presentation of the financial megaregulator, as the process has entered implementation stage. In the meantime, MIFC mastermind Alexander Voloshin sees the future unification of oversight as a key milestone for Moscow as International Financial Center.

Securities market: Bank of Russia lays groundwork to bring switch to proportionate regulation closer The Bank of Russia has released an ordinance which sets forth indicators enabling conditional classification of professional securities market participants as small, middle-sized and major ones. The passing of this regulatory act marks the first step in the implementation of the regulator-approved concept and roadmap for proportionate regulation and supervision of non-bank financial institutions.

FX dealers to operate under a basic consumer protection standard FX dealers will be obliged to disclose to the fullest extent possible information about their operations and risks related to their services. These and other requirements are listed in the basic standard for financial consumer protection as regards FX dealers, which was elaborated by the Association of Forex Dealers and approved by the Bank of Russia.

FX dealers to operate under a basic consumer protection standard FX dealers will be obliged to disclose to the fullest extent possible information about their operations and risks related to their services. These and other requirements are listed in the basic standard for financial consumer protection as regards FX dealers, which was elaborated by the Association of Forex Dealers and approved by the Bank of Russia.

Minfin is making an attempt to save the funded pension system, which will be liquidated according to Deputy Prime Minister for Social Security Olga Golodets. The ministry has acquiesced to the withdrawal of over RUB 1 trillion worth of savings for 2014-2015, and is trying to keep the rest. Minfin has drafted a bill (posted on regulation.gov.ru), that limits withdrawals of pension savings to 2014-2015. Going forward, it is business as usual for the funded pension system, states the bill.

“The bill must incorporate changes in the funded system, as announced by the Government in August”, explains Deputy Finance Minister Alexey Moiseev: the bill reflects the repeated withdrawal of pension savings, but from 2015 onwards, “the funded system remains part of the mandatory pension plan”.

The Minfin draft slates the transfer of ‘due’ amounts to private funds for as early as the next year. The amounts make up some RUB 500bn: the remainder of funded pension deposits for 2H 2013, as well as the money of ‘undecided’ individuals, raised by funds before all the moratoriums, says Moiseev.

The Government froze these funds in late 2013, with a promise to hand the money to funds as soon as they have joined the guarantee system. Most NPFs, accounting for over 80% savings are in the process of finalizing their association with the guarantee system — the Central Bank has already started auditing these NPFs.

Moiseev says the bill has been commissioned by the Government and has not been approved yet, however, it is due to be passed this year.

The social security block does not object to handing the remainder of the 2013 deposits to the NPFs — this was part of the original plan, said a Golodets representative, and yet limiting the withdrawal of savings to 2014-2015 as well as abolishing the entire funded system is “subject to further debate”.

This is the first official document to appear — in the past, the people and the business had no clues to follow except contradictory statements made by officials. The decision to withdraw funded pensions in 2015 for a second time was announced a month ago and surprised some ministers as well as the market.

On 5 August, Labor Minister Maxin Topilin said this ‘government decision’ exists, despite fierce objections from the finance and economy ministers and the Central Bank. A few days later Golodets claimed that the best way to proceed is via abolishing savings in state insurance altogether and transferring to voluntary savings programs. Golodets promised in late August that the decision to liquidate funded pensions could be passed by the Government in September.

The future of savings in private funds was suspended — RUB 1.1 trillion, deposited by people in non-state pension funds over 10 years. To avoid withdrawal of this amount for the state budget, Minfin proposed to market participants that the sum be assigned a new status and de facto privatized.

Ministry for Economic Development Slams SROs The Ministry for Economic Development questions the effectiveness of self-regulation. Problems have been identified and listed in a Report on SRO Activity to the President. The lowest point is SROs not being financially motivated to keep participants under tight scrutiny. Return to state regulation in a number of industries, including audit, is likely to put increased pressure on business, warn experts.

Russia Up Two Positions in Doing Business Russia is up two positions at #62 in World Bank/International Financial Corporation (IFC) Doing Business rating. This year the methodology has radically changed, and any comparison with Doing Business-2013, when Russia skipped 20 points to #92, is incorrect. The recalculated standing of Russia for last year is #64. This year Russia advanced to #62, swapping places with Cyprus. In the examined period – June 2013 to June 2014 – Russia implemented merely two reforms that were accounted for by Doing Business, versus five last year.

Duma Passes in Second Reading Tax Arrears Write-off for Abandoned Companies On Tuesday, the State Duma passed in the second reading a draft tax administration reform law, allowing the taxman to write off abandoned companies’ tax arrears. The document is also geared to improve corporate property tax calculation for business centers and shopping malls, as well as boost electronic workflow.

Moscow Exchange to Issue New Instrument in 2016 The new instrument is called clearing participation certificate (CPC) and will enable trading backed by a pool of collateral deposited at National Clearing Center (NCC), said Igor Marich, Money Markets Managing Director at Moscow Exchange.

Working Pensioners Will Continue to Receive Fixed Pension Prime Minister Dmitry Medvedev has turned down Minfin’s proposal to abolish fixed pension payments to working pensioners, a Government source told Vedomosti. A high-ranking Minfin official and Medvedev’s press officer Natalya Timakova confirmed that the proposal had failed to pass. The decision was carried out at Monday’s working session with the Prime Minister.

Minfin Attempts to Save Funded Pension System Minfin is making an attempt to save the funded pension system, which will be liquidated according to Deputy Prime Minister for Social Security Olga Golodets. The ministry has acquiesced to the withdrawal of over RUB 1 trillion worth of savings for 2014-2015, and is trying to keep the rest. Minfin has drafted a bill (posted on regulation.gov.ru), that limits withdrawals of pension savings to 2014-2015. Going forward, it is business as usual for the funded pension system, states the bill.

Eurasian Reinsurance Market Needs Standard Rules Bringing national rules to a common standard is essential for the Eurasian Economic Community reinsurance market, said All-Russia Insurers Union President Igor Jurgens at a Tuesday press conference.

Well Done: Market Praises Megaregulator The MIFC Taskforce summarized the results of the financial market megaregulator’s inaugural year. Last week’s roundtable discussion at the Moscow Exchange brought together the Central Bank and the financial market participants to a shared conclusion: this was a good year. The other takeaway is: most risks failed to materialize. Head of the MIFC Taskforce Alexander Voloshin called the megaregulator one of the most vital and successful state management reforms in recent years.

Central Bank: “Government nailed Russian investor’s hand” The Central Bank is preparing to retaliate against Western financial sanctions. “We need to adjust our tactics in dealing with Western partners”, CB First Deputy Chairman Sergey Shvetsov told the press today at the roundtable celebrating the megaregulator’s first year. Laws regulating the financial market will be amended. This particularly concerns the National Payment System Act (this Act was already toughened in May 2014, amendments in force since 1 July).

Melbourne Most Liveable City for 4th Time, Moscow #73 - Economist Events in Ukraine have had significant knock-on effects over the past year for cities such as Kiev, Moscow and St Petersburg, according to new Liveability rankings by Economist Intelligence Unit (EUI) – the analytical arm of the British magazine, The Economist.

Minfin Proposes to Protect Pension Savings from Nationalization Deputy Finance Minister Alexey Moiseev requested that pension market participants draft proposals on “transforming RUB 1.1 trillion of pension savings (that the NPF have accumulated by 2013) into non-state pension programs”, four participants of yesterday’s meeting at the Finance Ministry. Moiseev confirmed to Vedomosti that he has made a request to the market “to consider joining reserves and savings under the guarantee system”.

MSCI Index Maintains Two Russian State Banks MSCI Inc., a leading provider of investment decision support tools worldwide, announced today that following consultation with the investment community, MSCI will maintain Sberbank and VTB Bank in the MSCI Russia Index until further notice.

New Supreme Court: Expectations The structure of the supreme judicial body and the make-up and rotation of the panels affect the quality and effectiveness of courts. These are the factors that define the extent of independence and objectivity of courts in respect to all litigation, particularly business lawsuits.

MIFC Taskforce Wins NAUFOR Awards On 3 July 2014, the annual NAUFOR Stock Market Elite 2013 awards ceremony took place in Moscow. Individual investment accounts amendments, passed in end-2013, won the “Stock Market Development Project of the Year” category. Special thanks were given to the Ministry of Finance and the State Duma Budget and Financial Market Committees. MIFC Taskforce was directly involved in the drafting of the bill.

Important Financial Market Laws Enacted On 1 July 2014 the following important financial market laws were enacted: 1). Federal Act 379 of 21.12.2013 contains innovative amendments that were drafted with the direct involvement of the MIFC Taskforce.The Securities Market Act amendments have introduced two new types of entities – specialized financial companies and specialized project finance companies (the Russian analog of SPV). This change enables us to launch the mechanism of securitization.

Yandex Launches Russian Version of Foursquare Russian search engine Yandex on Wednesday released a new Russia-focused social networking application, Yandex.Gorod, which promises to help its users find popular venues and attractions throughout Russia by providing user reviews and locations of nearby bars, banyas and even cash machines — all necessities for daily life in Moscow.

Moody’s: New Russian securitization law is credit positive for Russian structured finance The new Russian structured finance legislative platform is credit positive for the Russian structured finance market, says Moody`s Investors Service in a report published today. The new framework contains the key elements required for a broad range of securitization and project finance structures and will provide onshore alternatives to securitization transactions that were previously possible only via offshore issuing vehicles.

Medvedev Commissions List of CGC State Companies By 11 June, the Ministry for Economic Development, Federal State Property Management Agency, Open Government Minister Mikhail Abyzov and Alexander Voloshin’s MIFC Taskforce are due to introduce to the Government a list of 50%-plus state-owned companies for priority Corporate Governance Code implementation. The Code was passed by the Government in February.

Financial SROs Want Role in Oversight Financial self-regulating organizations (SROs) protest Central Bank plans to side-step them in member audits. A new regulation draft contradicts the Financial Market SRO Act proposed by the CB, and could pose serious threats to market participants.

CB Proposes Insurance for Private Broker Accounts Plans to set up a compensation fund for clients of brokers that cease operation were aired yesterday at the Exchange Forum by Central Bank’s First Deputy Chairman Sergey Shvetsov. “National Stock Market Participants Association (NAUFOR) is drafting a concept — the risks covered by the fund, the fund’s sources of funding”, said Shvetsov, voicing support for the initiative.

CB Does Not Plan to Rid of DRs The Central Bank does not plan to eliminate depositary receipts, however it will promote share trading, said Bank of Russia Deputy Chairman Sergey Shvetsov at the Moscow Exchange Forum.

New CB Regulations May Force NPFs Off Market Almost half of non-state pension funds could be forced off the market in the process of establishing a system of mandatory pension savings guarantees. According to CB requirements, to be eligible, NPFs must comply with new capital adequacy ratios. RBC data shows that 8 out of 20 major NPFs, accounting for over 40% of all pension savings, fail to comply with the Bank of Russia requirements. Non-compliant funds will have to return pension savings to the Russian Pension Fund.

Bank of Russia’s 202 Good Deeds “They asked us what we want. For the financial market, it is a first”, responded licensed participants when the megaregulator approached them for KPI suggestions. Last October, the Bank of Russia warned that oversight and regulation will tighten in order to win the people’s trust and create long-term money.

Central Bank Financial Markets Service Dissolved In accordance with the Bank of Russia-based megaregulator launch plan, (and per Bank of Russia Board of Directors decision of 29 November 2013) the Bank of Russia Financial Markets Service (BRFMS) is officially dissolved as of 3 March 2014.

Russian Financial Markets Regulator Registers New MOEX Listing Rules On 7 February 2014, the Bank of Russia’s Financial Markets Service registered an amended version of Listing Rules for Moscow Exchange. As part of Russia’s listing reform program, the rules have been brought in line with the Rules for Admission of Securities to Organized Trading previously approved by the regulator.

Government Drafts New Corporate Code Today, the Government will debate and possibly adopt a new Corporate Governance Code. The draft is a joint effort by the Central Bank Financial Markets Service and the MIFC Taskforce. The new code replaces the 2002 version.

Russian Bonds Open to the World From 30 January, Euroclear Bank starts to offer post-trading services on Russian corporate and municipal bonds. Clients can process settlement and use the National Settlement Depositary (NSD) Euroclear account for safekeeping, according to a joint Euroclear/NSD press release.

Implementation of e-comms in the Russian financial market On 17 January 2014, Moscow International Financial Center Taskforce hosted a meeting on Electronic Communications with First Deputy Chairman of the Bank of Russia, Head of Financial Markets Service Sergey Shvetsov and financial market participants.